China's pace of technological innovation has far exceeded all US predictions.

With breakthroughs in lithium-ion batteries, electric vehicles, and next-generation nuclear technologies, Chinese companies are rapidly closing the gap with their Western rivals. With strong government support, a large workforce, and a vast domestic market, these companies are poised to not only rival, but surpass, multinational corporations within the next decade.

Can China innovate and surpass the US in the battle for technological dominance?

An extensive 20-month study of 44 leading Chinese technology companies has sounded alarm bells in the US. Key sectors such as nuclear energy, semiconductors, artificial intelligence (AI), electric vehicles and materials science have demonstrated significant innovation capabilities.

At an event held on Capitol Hill in late September, experts from the Information Technology and Innovation Foundation (ITIF) - a research organization in Washington (USA) presented research findings showing that the rapid development in the technology sector in China is posing serious challenges to the US, requiring policymakers to take drastic actions.

Research expert Stephen Ezell, Director of ITIF, surprised everyone when he announced at the meeting that: "China's innovation system, although still limited, has developed strongly beyond previous assessments."

"Although it is not yet possible to confirm that China is leading comprehensively, the evidence shows that the country has been and is surpassing in some specific areas. In many other areas, Chinese businesses are fully capable of matching or surpassing Western competitors within the next decade," said Mr. Stephen Ezell.

Chinese companies are “leading the way” in nuclear power, electric vehicles and batteries, said Stephen Ezell, but he also pointed out that the country’s pace of innovation in advanced semiconductors has been slow.

To evaluate companies, analysts often look at factors such as investment in research and development, quality of human resources, the existence of innovation teams, international awards and market share. They then compare these factors with the world's leading companies in the same field.

China could soon surpass the US by 10-15 years in deploying large-scale fourth-generation nuclear reactors, according to Robert Atkinson, President of ITIF.

The world’s second-largest economy is now leading the way in nuclear power plant construction, with new construction far outpacing the rest of the world combined. In the past decade, it has built more reactors than the United States did in the past 30 years.

By 2030, China is expected to surpass the US in nuclear power generation as it has become the first country to deploy advanced fourth-generation reactors with new designs and passive safety systems.

Stephen Ezell marveled at the rapid growth of China’s auto industry. From a modest 5,200 vehicles in 1985, the country is expected to produce 26.8 million vehicles this year, accounting for 21% of the global market. He predicted that figure would rise to 30% by the end of the decade.

China currently holds a dominant position in the global market with 62% of electric vehicle production and 77% of EV battery production, demonstrating the country's absolute superiority in the field of electric vehicle manufacturing.

In the biopharmaceutical sector, the ITIF survey found that although China still lags behind the leaders of the US and the West, it is catching up quickly. Between 2002 and 2019, China’s share of global value-added in the biopharmaceutical industry quadrupled to nearly 25%.

In the robotics space, Ezell said, “We see that Chinese companies themselves are not as innovative as American, Korean or Japanese companies, with the exception of Kuka, a German industrial robot maker acquired by Chinese home appliance maker Midea Group in 2016.”

However, China deployed more industrial robots last year than the rest of the world combined, the ITIF director added. “This means they will see the impact of robots and automation to bring greater efficiency and drive the development of industries.”

In semiconductors, the survey found that China is about two to five years behind the world's leaders, with the most advanced chips produced by Huawei Technologies three years behind.

In 2020, Huawei faced severe US sanctions that cut off its access to advanced chips. However, last year, the company surprised Washington by launching a new smartphone powered by advanced domestically produced semiconductors.

US continues to issue new bans on China

To protect its technological leadership, the US Department of Commerce in September issued new regulations to tighten controls on exports of quantum computers and advanced chipmaking equipment, measures that are expected to prevent sensitive technology from falling into the hands of competitors.

The move comes after the department issued an export control order in 2022 that aims to limit China's access to advanced computer chips, hinder the development and maintenance of supercomputers and limit the country's semiconductor manufacturing capacity.

To comply with the US government ban, US companies like Nvidia have had to adjust their products, offering more limited-performance versions of their chips to the Chinese market, instead of their most advanced chips.

The rise of domestic companies like Huawei has put huge competitive pressure on Nvidia, causing the company's revenue from the China market to fall from 26% to 17% over the past year.

Rick Switzer, a former technology policy official at the US State Department, has warned that China is catching up with older chips used to make everything from washing machines to refrigerators to defense systems.

Mr. Rick Switzer asserted that the ITIF report has put to rest unfounded suspicions that China is simply copying technology from the West. According to him, this report has clearly demonstrated that China is capable of independent innovation.

He cited a recent visit by Ford executives to China, where they found that electric vehicles made in China were not only competitively priced but also had innovative features. This clearly shows that the Chinese auto industry is constantly innovating.

Switzer asserted that China has invested a lot of resources and human resources to develop its own technology and has achieved remarkable results.

Tesla can attest to this challenge. In 2023, China’s BYD emerged as the world’s leading electric vehicle maker, selling about 3 million vehicles. That same year, billionaire Elon Musk’s company sold 1.81 million vehicles globally, and in the first half of 2024, Tesla’s sales in China fell 5%.

In response, Washington has stepped in. In May, US President Joe Biden ordered a 100% tariff on Chinese electric vehicles. Biden has set a goal of producing electric vehicle batteries in the US without relying on critical minerals from China by 2030.

Mr. Switzer found that American and Chinese researchers together published a large number of scientific papers, far exceeding those of any other country. He also noted that, despite attracting many Chinese students to study abroad, the United States has failed to retain much of this talent, with about 70% of students choosing to return to work for domestic companies and research institutes.

In his closing remarks at the event, US Congressman John Moolenaar, a Republican from Michigan and chairman of the House Special Committee on China, said capital and export controls remain central to the US defense strategy against China.

"To achieve our ultimate strategic goal against our political opponents, we need to immediately impose export restrictions and strictly control capital flows abroad. At the same time, investing heavily in domestic projects will help us strengthen our strength and gain an advantage," said Mr. John Moolenaar.

In August 2023, President Joe Biden signed an executive order banning US capital flows to Chinese companies involved in advanced technology areas such as chips, AI and quantum computing.

Emily Jin, founder of Datenna, a leading data analytics company on China, warned that China is rapidly gaining leadership in many cutting-edge technology areas, with the goal of converting technological superiority into economic and political power.

She also said that the political environment in China is less polarized than that in the US today. It is the high consensus in implementing industrial policies and technological innovation that has helped China make great progress.